China: Despite Economic Miracle, Millions Remain Poor

Hong Kong, 18 September 1997 (RFE/RL) - China is now the world's tenth largest trading nation, it attracts more foreign direct investment than any other country apart from the U.S., and has been averaging an economic growth rate of nine percent annually for more than a decade.

In the nearly 20 years since it began its first tentative reforms, says the World Bank, real per capita incomes in China have quadrupled, the illiteracy rate has fallen below 10 percent, and life expectency and infant mortality rates are the envy of many nations.

With all this, however, China remains one of the poorest nations on earth. More than 270 million Chinese people are still below the $1-per-day poverty standard used by the World Bank, accounting for one-fifth of the world's poor.

In a series of reports on China released in Hong Kong today, the World Bank says that Beijing has achieved some remarkable things since the early 1970s when 80 percent of its population eked out a meager existence tilling the soil and earning less than $1-a-day. One-third of all Chinese adults in those days could neither read nor write. Over the past 15 years, there has been a fourfold expansion of the Chinese economy which has managed to avoid many of the worst pitfalls of transformation suffered by the nations in East and Central Europe and Central Asia. The World Bank reports conclude, however, that to sustain this economic power into the 21st century, and spread its benefits further to its people, China must shift to the next stage of reforms.

"The major challenge is not so much the establishment of the principles, but trying to figure out how to implement these principles," says Yukon Huang, the World Bank's China country director.

The bank says everyone agrees China must now deal with its huge, central state-owned enterprises -- a sector that is grossly inefficient and a huge drag on the state budget. Everyone agrees that the principles of enterprise restructuring, commercialization and privatization must be the next step.

"What we learned from the other transition economies is that the process of reform beginning with corporatization and share holding is a very complicated one," he said. He says the countries in Central and East Europe and Central Asia are still dealing with the "very difficult issues such as valuation of assets, distribution of shares, selling the liabilities, dealing with the social assets of enterprises."

The report says China has one great advantage over the countries of the former Soviet Union -- its backwardness. While in the 1970s, central government agencies in the USSR were physically allocating about 60,000 different commodities through central planning, the number in China was about 600, unchanged from 1965. Even at the height of central planning in China, it says, 30,000 rural markets continue to operate, although with some restrictions.

That gives China great advantages in moving away from central planning and Yukon Huang and other bank officials said the Communist party congress has just set the right goals for the country for the next area of reforms. But what about political reforms, asked many reporters at a briefing in Hong Kong. Isn't there a need for some real democratic reforms to go along with the economic?

Nicholas Hope, who just shifted from being China country director at the bank to chief of staff in the Europe and Central Asia department, answered by saying that democratic reforms at the grass roots are "already proceeding apace" and although there is a single party, the selection process has been greatly freed and in most villages and townships, the local people choose their own leaders.

Yukon Huang said bank officials believe that a wide diversity of views and interests are being expressed and debated throughout China even though there is only one party. He said what the communist party seems to be doing is serving as a focus for dealing with China's great diversity of economic, social and political interests in a changing country in a changing world.

These reforms are needed "for any functioning of a socialist market economy or a capitalist market economy," said Yukon Huang. "There isn't any contradiction."